The OECD (Organization for Economic Co-operation and Development) is an intergovernmental organization that was formed in 1961 to stimulate world trade. The organization currently consists of 36 countries that have a shared vision of market economy and democracy. The organization provides a platform where members can share and compare policy experiences, find solutions to common challenges, and coordinate on domestic as well as international policies. The majority of members are considered developed nations and high-income economies. The organization accounts for 62% of the world’s nominal GDP and 42.8% of the world’s real GDP. Different nations in the OECD follow different minimum wage setting mechanisms and in some countries, the minimum wage is set through government legislation or established through a consultation process while in others the wages are set through a bargaining process. Countries with the lowest median salaries in the organization include Mexico, Hungary, Latvia, Slovakia, Estonia, Czechia, Portugal, Greece, Poland, and Chile.
The 10 OECD Countries With The Lowest Salaries
Mexico has the lowest wages among the OECD member countries with a median salary of $15,311. The nation, however, had a significantly lower tax rate at 11.2% in the year 2017 compared to OECD average tax rate which is 25.5%. This translated to an average Mexican worker taking home about 88.8% of their gross pay after tax and benefits compared to 74.5% for the average OECD worker. Child benefits for the average married employee with two children dropped to 11.2% which is among the lowest in the OECD (the OECD average stands at 14%).
Hungary has the second lowest wages in the OECD with a median salary of $21,711. The nation also has the 6th largest tax wedge with the average worker handling a 46.2% tax wedge compared to 35.9% which was the OECD average in 2017. It was also observed that the average worker was taxed substantially higher at a rate of 33.5% compared to 25.5% which is the OECD average tax rate meaning that the average worker took home only 66.5% of their total pay as net pay. Benefits for the married employees with two children dropped to 14.5% compared to 14% as the OECD average. Monthly wages are expected to rise by 4.9% by the end of the year making it the highest increase among OECD countries.
Latvia has a median salary of $22,389 thus making it the country with the third lowest wages in the OECD. The average wage is however expected to increase by 4.1% by the end of the year making it the second highest increase among OECD countries.
Slovakia has the fourth lowest wages in the OECD with a median salary of $23,508. The nation ranks 12th regarding tax wedge with the average worker facing a tax wedge of 41.6% compared to 35.9% as the OECD average. The average Slovak worker, however, enjoys a significantly lower tax rate of 23.5% compared to 25.55% which is the OECD average tax rate. The average married worker with at least two children takes home a substantially bigger slice of their gross wage which is about 92.2% of total pay after tax and benefits compared to the average OECD worker who takes home about 86% of their gross pay.
Employment and Wage Stagnation in the OECD
Economic data accumulated in the year 2018 indicated that there was an increase in economic growth among member countries and that unemployment had dropped to record lows (the employment rate in the OECD was 62.1%), salaries and wages were however noted to have stagnated in some of the member countries. The level of poverty was also seen to rise among the working population to 10.6% compared to data estimates ten years earlier. Wage increase was also notably slower compared to the period before the financial crisis. Data collected also showed wage growth to be about half of the rate it used to be a decade earlier. Factors such as productivity slowdown, increase in low paying jobs, and low inflation have been blamed for the wage stagnation.